Private Health and Insurance

Abstract

With over 28,000 beds, private hospitals account for a third of all acute hospital beds in Australia. Private hospitals tend to be located in major cities and attract patients from higher socio-economic demographics than public hospitals.

Of the 630 [515] licensed private hospitals in Australia, 258 [282] offer acute or psychiatric care and these hospitals discharged over three million patients in 2015-2016 [2012–2013]. Those patients stayed a total of 8.3 million bed days. Nearly half a million patients attended one of the 20 private emergency departments.

Private hospitals treat patients for a selective range of services—treating just 24% of [urinary problems, 25% of] respiratory conditions, [26% of radiotherapy services] 17% of general medical services and 22 [9% of obstetric cases. On the other hand, they provided [79] 81% of admitted dental services and [,] 72% of eye procedures. [and 66% of breast surgery].

With an operating margin of over 9%, private hospitals are increasingly owned by large groups—either for-profit or not-for-profit. Ramsay Health Care now own or operate 8.6% of all hospital beds in Australia and around 26% of all acute private beds.

Medical staff who work in private hospitals are predominantly non-salaried, known as Visiting Medical Officers, while those in public hospitals tend to be a mix of both salaried and non-salaried. Their engagement is governed by the hospital by-laws. Specialists in private hospitals admit patients under their care and direct the treatment and discharge of their patients.

With the ageing population, increasing numbers of specialists and tightening funding for public hospitals, the acute private hospital sector is expected to expand faster than the population growth rate.

Private health insurance in Australia is highly regulated. Five health funds control 83% of the market.

The Government has introduced a range of mechanisms to maintain the health insurance participation rate, which sat at 55% in 2015. These mechanisms include the Medicare Levy Surcharge, Australian Government Rebate and the Lifetime Health Cover loading.

The Private Health Insurance Act 2007 requires health insurance products that are offered to Medicare eligible persons to be compliant. Criteria for compliance include community rating which excludes the fund from discriminating against members or potential member on the basis of health risk. Complying products that cover hospital treatment must always include cover for psychiatric, rehabilitation and palliative care. All health funds participate in the Risk Equalisation scheme that pools funds on the basis of health risk and redistributes the pool on the basis of the claiming patterns and member profile. This enables smaller funds to better manage the risk of an ageing population and high-cost claims.

Insurers offer two type of product—Hospital Treatment and General Treatment. Most also offer a combination of the two. Hospital costs are separated into accommodation, prosthesis and medical costs.

Where the member is eligible for Medicare payments, insurers usually first submit the medical claim to Medicare for consideration and payment of the Medicare portion. The health insurer then pays the gap between what Medicare has paid and 100% of the MBS schedule fee. The insurer may also pay an additional amount towards the in-hospital medical costs according to any arrangement the fund may have with the specialist.

Health insurers face a range of pressures, particularly from the ageing population, rising health costs, members downgrading their cover and switching between funds.

A key change in focus for health insurers has been the recent emphasis on quality rather than a single-minded focus on cost. By focusing on quality- and value-based purchasing, hospitals are increasingly becoming expected to meet the costs of preventable events and avoidable readmissions.